Budget 2017: up to 50,000 Airbnb hosts could pay between £400 and £3,300 more tax

Up to 52,000 Airbnb hosts around Britain could face an increase in tax of between £400 and £3,300 a year if the Government decides to scrap rent-a-room relief for short term lettings.

The average host earns £2,000 a year by letting part or all of their home via the huge Airbnb online marketplace. The typical user in London makes £3,500.

This could all change following a paragraph buried in Wednesday’s Budget document suggesting the “rent-a-room” taxbreak would be removed for short-term letting.

If rent-a-room relief is abolished, those renting rooms in their houses will need to keep detailed records of their income and any deductible expensesPatricia Mock, Deloitte

The Government “will consult on proposals” to “align the relief more closely with its intended purpose, to increase supply of affordable long-term lodgings”.

Of Airbnb’s 52,000 hosts an unknown proportion rent out their entire properties via the site. They would already be taxed on the profits. However, tens of thousands of users who rent out only rooms would be entitled to the £7,500-a-year tax perk.

If the perk is scrapped, higher-rate taxpaying hosts would be hit with a sudden £800 tax bill, based on the average £2,000 earning across the country.

A higher-rate taxpayer hosting guests in London would pay an extra £1,540 per year in tax. Basic-rate users would pay an average extra £400.

Even if the perk is ultimately abolished for short-term lets, some tax relief remains available.

Deduct expenses which are ‘just and reasonable’

You should be able to offset your Airbnb earnings with a proportion of your household expenses, such as utilities and mortgage interest (not including any capital repayment). The proportion of any expenses claimed must be “just and reasonable”.

For example, if you lived in a house with six rooms and rented out one all year you could divide your bills and mortgage interest by six.

With bills totalling £1,250 a year you could deduct £208. If your mortgage interest was £139 a month, you could take a sixth of this and claim another £278.

Hence £5,000 income from letting a room could be reduced to £4,514 for tax purposes.

Basic rate taxpayers would pay £902.80, those in the higher and additional rate tax band would have a bill of £1,805.60 and £2,031.30.

Replacement relief

This relief replaced the Wear and Tear Allowance from April 2016.

It allows landlords to deduct the cost of replacing items from rental income. You cannot claim for the cost when you first kit out a room.

Relief is given for replacement of furniture, furnishings such as carpets, kitchenware and white goods such as fridges.

If you sell an old item and replace it with something new you can claim on the cost minus the proceeds.

You can also deduct the costs of disposing old furniture or appliances from your income.

‘Sharing economy’ £1,000 allowance

From April, a £1,000 tax break will be introduced for property and trading income.

The new perk is designed to benefit “micro-entrepeneurs” in the “sharing economy” such as those who list items on online platforms such as eBay or Etsy, take on occasional jobs such as providing lift shares, or those who let out their homes or garages.

If you claim rent-a-room relief, you are not entitled to this allowance.

If the scheme is scrapped, Airbnb hosts will still be able to earn £1,000 tax-free.

Be warned - HMRC’s ‘Snoopercomputer’ could catch avoiders

Airbnb hosts who fail to pay due tax might be found out. HMRC’s powerful “Connect” system can access income information from a number of government and corporate sources including websites such as Airbnb.

It will then investigate if there are discrepancies with this data and that of an individual's tax.

In December 2016, HMRC sent letters to 10,000 individuals who had submitted their 2014-15 tax return without a complete declaration of savings interest received.

HMRC said it had used information gathered from banks, peer-to-peer lenders such as Zopa and other financial institutions and then checked it against individuals’ tax returns.

Patricia Mock, director at Deloitte, the accountancy firm said: “If rent-a-room relief is abolished, those renting rooms in their houses will need to keep detailed records of their income and any deductible expenses, including for replacement furniture etc, and are likely to need to register for self-assessment to file tax returns and pay the tax due”.

An Airbnb spokesman said Airbnb hosts “want to pay their fair share of tax” and it wants to help.

He said the platform reminds hosts to “check and follow tax rules, sends email reminders during tax season and has downloadable transaction histories for hosts.”

Have you had an Airbnb nightmare? Let us know: amelia.murray@telegraph.co.uk